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Superior Uniform Group Inc Reports Operating Results (10-Q)

October 23, 2009 | About:
10qk

10qk

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Superior Uniform Group Inc (SGC) filed Quarterly Report for the period ended 2009-09-30.

Superior Uniform Group manufactures and sells a wide range of uniforms corporate I.D. career apparel and accessories for the hospital and healthcare fields; hotels; fast food and other restaurants; and public safety industrial transportation and commercial markets as well as corporate and resort embroidered sportswear. (Press Release) Superior Uniform Group Inc has a market cap of $48.4 million; its shares were traded at around $8.87 with a P/E ratio of 134.1 and P/S ratio of 0.4. The dividend yield of Superior Uniform Group Inc stocks is 6.7%.

Highlight of Business Operations:

The current economic environment in the United States remains very challenging. A significant number of companies, including many of our customers, have closed locations, reduced headcount or both. Additionally, voluntary employee turnover has been reduced significantly. Fewer available jobs coupled with less attrition resulted in decreased demand for our uniforms and service apparel. Additionally, customers are being more cost conscious and are delaying purchases of new uniforms whenever possible. As a result of these factors, net sales decreased 9.8% from $30,613,175 for the three months ended September 30, 2008 to $27,605,397 for the three months ended September 30, 2009. Net sales decreased 20.2% from $95,595,090 for the nine months ended September 30, 2008 to $76,293,014 for the nine months ended September 30, 2009.

Cost of goods sold, as a percentage of sales, approximated 67.5% for the three months ended September 30, 2009 compared to 67.1% for the three months ended September 30, 2008. Cost of goods sold, as a percentage of sales, approximated 67.7% for the nine months ended September 30, 2009 compared to 66.9% for the nine months ended September 30, 2008. The increase as a percentage of sales in the three-month period is primarily attributed to an increase in direct product costs as a percentage of sales (1.2%) offset by the impact of more efficient operations in our value added services area (0.8%). The increase in the nine-month period is primarily attributed to an increase in direct product costs as a percentage of sales (0.6%) combined with the significant reduction in net sales outpacing the reduction in overhead included within cost of sales (0.2%). The Companys gross margins may not be comparable with other entities, since some entities include all of the cost related to their distribution network in cost of goods sold. As disclosed in Note 1 to the Condensed Consolidated Financial Statements, the Company includes a portion of the costs associated with its distribution network in selling and administrative expenses. The amounts included in selling and administrative expenses for the three-month periods ended September 30, 2009 and 2008, respectively, were $1,574,284 and $1,773,629. The amounts included in selling and administrative expenses for the nine-month periods ending September 30, 2009 and 2008, respectively, were $4,805,414 and $5,591,519.

Selling and administrative expenses, as a percentage of sales, approximated 26.2% and 27.7% respectively, for the three-month periods ended September 30, 2009 and 2008. Selling and administrative expenses, as a percentage of net sales, were approximately 29.6% and 27.6%, respectively, for the first nine months of 2009 and 2008. The decrease as a percentage of sales in the three-month period is primarily attributed to decreased salaries, wages and benefits other than pensions (4.6%) offset by the impact of lower net sales to cover operating expenses (2.6%) and higher retirement plan expense (0.9%). The increase as a percentage of sales in the nine-month period is primarily attributed to the impact of lower net sales to cover operating expenses (6.0%) and higher retirement plan expense (0.9%) offset by decreased salaries, wages and benefits other than pensions (4.6%).

The Companys effective tax rate for the three months ended September 30, 2009 was 25.9% versus 35.4% for the three months ended September 30, 2008. The Companys effective tax rate for the nine months ended September 30, 2009 was 27.8% versus 37.9% for the nine months ended September 30, 2008. The decrease in the rate for the three-month period is attributed primarily to a benefit for untaxed foreign income (8.5%) in the current period, a decreased accrual for uncertain tax positions (1.4%), a decreased accrual for state taxes (2.5%), offset by an increase from the impact of permanent differences between book and tax basis earnings related to share-based compensation (0.8%) and other items (2.1%). The decrease in the rate for the nine-month period is attributed primarily to a benefit for untaxed foreign income (8.5%) in the current period, a decreased accrual for uncertain tax positions (1.9%), a decreased accrual for state taxes (1.2%) offset by the increase from the impact of permanent differences between book and tax basis earnings related to share-based compensation (1.0%), and other items (0.3%).

The Company has a $15,000,000 revolving credit facility with Wachovia Bank, which matures on June 30, 2010. At the option of the Company, any outstanding balance on the agreement at that date will convert to a one-year term loan. As of September 30, 2009, the Company had no outstanding balance on its revolving credit facility. The available balance under the credit facility is reduced, however, by its outstanding letters of credit. As of September 30, 2009, the Company had approximately $85,000 outstanding under letters of credit. Interest on the revolving credit facility is payable at LIBOR plus 0.60% based upon the one-month LIBOR rate for U.S. dollar based borrowings (0.85% at September 30, 2009). The Company pays an annual commitment fee of 0.15% on the average unused portion of the commitment. The Company is in full compliance with all terms, conditions and covenants of its revolving credit facility.

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